THE AMERICAN ECONOMY, COUNTRYWIDE & CARLO PONZI

Wow. It looks like the leaders at Countrywide who helped build and feed the sub-prime mess are going to walk away with additional millions of dollars after Bank of America finishes purchasing the company. This comes after Countrywide directors cashed out so many millions of dollars in options that the Securities & Exchange Commission started looking into insider trading (company directors selling company stock is exactly the opposite of what happened after the last major market meltdown occurred in 1987; but that’s another story).

So, what helped make Countrywide such a bargain for BofA? Primarily three developments:

1. EASY MONEY & ASSET INFLATION: The price of Countrywide (and its industry) had to be driven up. Thank you Alan Greenspan.

2. DEREGULATION allowed investors to enter the home mortgage market. Thank you Republican Party (who apparently couldn’t imagine that good investors would yield to speculators who, with enough easy money, would become Ponzi-like sharks, depending on asset inflation and creative credit instruments to keep the mania going).

3. MARKET SUBSIDY: After getting wrapped into the sub-prime mess Countrywide secured billions of dollars in government backed loans to help cover losses.

While easy money and deregulation helped Countrywide’s stock price soar in the 2000s, federal loans helped the company bury their financial “toxic waste” because the feds, incredibly enough, accepted Countrywide’s sub-prime debt as collateral.

That’s right. In spite of company directors selling company stock like rats jumping off a sinking ship, and a boat-load of bad debt, the federal government gave Countrywide billions of dollars in loans, and then took Countrywide’s financial garbage as collateral. BofA then swoops in and purchases the troubled company at a bargain price, knowing that the federal government now has a stake in Countrywide.

You know it seems that the more details we see in these rescues-bailouts, the more it appears the only real problem in the Pyramid Schemes of Charles Ponzi was that he never had Greenspan-like easy money, nor was he able to hook the federal government into underwriting his shady deals.

- Mark